2015 (1) TMI 1291 - HC - VAT and Sales Tax

Harassment of the petitioner - demand of VAT illegally - Estimation of turnover escaped from VAT - Bihar Value Added Tax Act, 2005 - in view of the inspection report, it was estimated that in two years the petitioner must have made turnover of a sale of ₹ 36,00,000 and taking a minimum amount the tax was calculated at ₹ 1,44,000/- and penalty of the same amount was imposed under Section 28 of the Act. Held that - In our view, the report of the District Magistrate, Khagaria clearly goes to show that there was only one shop at the location, Station Road, Khagaria by the name of Shiv Shiva Readymade Dresses. It is also not in dispute that the petitioner has obtained registration certificate under the Bihar VAT Act and has TIN number duly allotted under the said Act by the name of Shiv Shiva Readymade Dresses. Once these two facts are taken into consideration, it is evident that the officers of the Commercial Tax Department have acted in this matter only to harass the petitioner with motive known only to them. If the basic fact remains that the shop was being run in the name of Shiv Shiva Readymade Dresses, which fact has been verified by an authority no less than the District Magistrate, Khagaria, then every statement made in the impugned order of the Commercial Tax Officer is based entirely on conjectures and surmises and does not have any basis to support the same. If it is a case of evasion of tax then appropriate provisions of the Bihar Value Added Tax ought to have been applied for proceedings against the petitioner but no action could have been taken under Section 28 of the Act treating the petitioner as a dealer having no registration certificate. - writ applications allowed - Decided in favor of assessee.

Summary

Issues:
Quashing of order under Section 28 of Bihar Value Added Tax Act, 2005 based on inspection report discrepancies and alleged harassment by Commercial Tax officials.

Detailed Analysis:

1. Quashing of Order under Section 28 of Bihar Value Added Tax Act, 2005:
The petitioner sought to quash the order dated 15.5.2012 passed by the Additional Commissioner, Commercial Taxes, Bihar, dismissing the Revision Case No.CC (5)179/2011-12 under Section 74 of the Act. The order imposed a tax and penalty of &8377; 2,88,000 on the petitioner based on an inspection report indicating discrepancies. The petitioner contended that the inspection report inaccurately noted the shop's name and alleged that the authorities were harassing him despite being registered under the Act. The District Magistrate's report confirmed the shop's name as Shiv Shiva Readymade Dresses, contradicting the inspection report's claims of multiple shops. The court found the authorities' actions as harassment and lacking a legal basis, especially since the petitioner held a valid registration certificate and TIN number under the correct shop name. The court concluded that the Commercial Tax Department's actions were unjustified, and the order under Section 28 was quashed.

2. Alleged Harassment by Commercial Tax Officials:
The petitioner argued that the Commercial Tax officials were targeting him unjustly, as evidenced by discrepancies in the inspection report and the District Magistrate's confirmation of the correct shop name. The petitioner's counsel emphasized that the authorities' actions were intended to harass the petitioner, who was registered under the Act and operated only one shop, Shiv Shiva Readymade Dresses. The court agreed with the petitioner's contentions, noting that the authorities' reliance on conjectures and surmises without factual basis indicated harassment. The court highlighted that the initiation of proceedings under Section 28 without proper grounds for tax evasion was unwarranted and amounted to harassment. The court found the authorities' actions unjust and ruled in favor of the petitioner, quashing the impugned orders.

3. Legal Remedies and Adherence to Correct Procedures:
The respondents argued that the petitioner had alternative remedies before the Commercial Taxes Tribunal and that the petitioner's own actions, such as signing the inspection report and filing the vakalatnama under a different name, contributed to the confusion. However, the court emphasized that the District Magistrate's report confirmed the petitioner's position, rendering the authorities' actions baseless. The court underscored the importance of adhering to correct procedures and factual accuracy in tax proceedings, highlighting that harassment of registered dealers without proper legal grounds was unacceptable. The court allowed the writ application, quashing the orders of the Additional Commissioner and the Commercial Tax Officer, and vindicated the petitioner's position based on factual verification and legal principles.

This detailed analysis encapsulates the court's thorough examination of the issues surrounding the quashing of the order under Section 28 of the Bihar Value Added Tax Act, 2005, and the alleged harassment faced by the petitioner by the Commercial Tax officials. The court's decision to uphold the petitioner's rights and quash the impugned orders showcases a commitment to justice, correct legal procedures, and protection against unwarranted harassment in tax matters.